Biocorrx, Inc. v. VDM Biochemicals, Inc.

314 Cal.Rptr.3d 668

BIOCORRX, INC., et al., Plaintiffs and Respondents,

v.VDM BIOCHEMICALS, INC., et al., Defendants and Appellants.

G061535

Court of Appeal, Fourth District, Division 3, California.

Filed October 23, 2023

As Modified on Denial of Rehearing November 17, 2023

Vegh IP Legal, Stephen Z. Vegh, Redondo Beach; Amin Talati Wasserman and William Paul Cole for Defendants and Appellants.

Samini Baric Katz, Michael I. Katz and Ignacio J. Lazo ; Katz Law Office, Michael I. Katz and Byron H. Ruby for Plaintiffs and Respondents.

OPINION

MOORE, ACTING P. J.

The Legislature enacted Code of Civil Procedure section 425.16, commonly known as the anti-SLAPP statute, to prevent powerful plaintiffs from chilling a defendant's valid exercise of free speech rights.¹ But the Legislature later observed that commercial defendants were abusing "the anti-SLAPP statute by claiming their advertising impacted the public interest." ( Metcalf v. U-Haul International, Inc. (2004) 118 Cal.App.4th 1261, 1267, 13 Cal.Rptr.3d 686.) To combat this abuse, the Legislature enacted the commercial speech exemption, found in section 425.17, subdivision (c). When this exemption applies, the challenged speech or conduct is not protected by the anti-SLAPP statute. ( Metcalf , at p. 1265, 13 Cal.Rptr.3d 686.)

Here, BioCorRx, Inc. (BioCorRx) is a publicly traded company that is primarily engaged in the business of providing addiction treatment services and related medication. It issued several press releases that allegedly made misrepresentations and improperly disclosed confidential information about a treatment it was developing for opioid overdose. We find these statements fall within the commercial speech exemption because they were representations about BioCorRx's business operations that were made to investors to promote its goods and services through the sale of its securities.² Since these statements are not protected by the anti-SLAPP statute, we reverse the part of the trial court's order granting the anti-SLAPP motion as to the press releases. We affirm the unchallenged portion of the order striking unrelated allegations.

IFACTS AND PROCEDURAL HISTORY

VDM Biochemicals, Inc. (VDM) specializes in the synthesis and distribution of chemicals, reagents, and other specialty products for life science research. It owns a patent (the patent) for VDM-001, a compound with potential use as a treatment for opioid overdose. "VDM-001 is a ‘drug product candidate’ at a pre-clinical stage of its development" that still requires further pre-clinical development and clinical development before it can be utilized commercially.

BioCorRx is a publicly traded corporation located in Anaheim that provides addiction treatment services and medications for treating addiction. BioCorRx explained its business model in an Investor Presentation filed with the Securities and Exchange Commission (SEC) in November 2018 (the investor presentation). The investor presentation noted that "[t]he addiction treatment market represents a multi-billion dollar industry ...." It then explained BioCorRx's two-prong approach for operating in that market. First, it "[s]eek[s] FDA approval of new medications to treat alcohol and opioid use disorders." Second, it operates the "revenue generating BioCorRx[ ] Recovery Program [that] combin[es] medication and therapy."

In September 2018, VDM and BioCorRx entered into a Mutual Nondisclosure & Confidentiality Agreement (the NDA), which restricted each party's disclosure of confidential information as they discussed forming a business relationship.

A month later, VDM and BioCorRx signed a Letter of Intent to Enter Definitive Agreement to Acquire Stake in Intellectual Property (the letter of intent). The letter of intent memorialized the parties’ "shared desire to sincerely explore the entering into a formal agreement whereby BioCorRx shall partner [with VDM] to develop and commercialize" VDM-001 as a treatment for opioid overdose. The parties agreed "to use best efforts to enter into a definitive agreement within 6 months from" the letter of intent. The letter of intent also granted BioCorRx a "right of first refusal to acquire up to a 49%" equity stake in the patent.

A declaration from VDM's chief executive officer states that VDM understood BioCorRx needed to validate some of the information in the patent and confirm that VDM-001 could treat opioid overdose. Evidence in the record also shows BioCorRx provided funds from April 2019 to October 2020 to conduct preclinical studies, engage consultants, and provide other resources to develop VDM-001.

BioCorRx issued press releases concerning VDM and VDM-001 in October 2018, December 2019, and March, May, August, and November 2020 (together, the press releases). The initial press release in October 2018, "announced the execution of a letter of intent (LOI) with [VDM], subject to execution of a definitive agreement, whereby the companies would partner to further develop and commercialize VDM's new opioid antagonist molecule, VDM-001 .... Under the agreement, BioCorRx has the right of first refusal to acquire up to a 49% ownership stake in VDM-001 .... Both parties have agreed to use best efforts to enter into a definitive agreement within 6 months from the date of the LOI execution on October 1, 2018." The subsequent press releases provided general updates on BioCorRx's development of VDM-001 as a treatment for opioid overdose.

After signing the letter of intent, BioCorRx and VDM apparently exchanged numerous e-mails and draft agreements but never signed a formal contract concerning VDM-001. Their relationship eventually soured.

BioCorRx filed a complaint (the complaint) against VDM in March 2022. Among other things, BioCorRx alleged that although the parties had not signed a formal contract, they had reached an agreement via e-mail concerning VDM-001's development in March 2019 (the alleged agreement). Under the alleged agreement, BioCorRx obtained an ownership interest in VDM-001 based on the amount of research and development funding it provided. It also retained its right to purchase an additional interest in VDM-001 of up to 49 percent. But after BioCorRx informed VDM of its preclinical studies’ findings, VDM purportedly repudiated the alleged agreement and interfered with BioCorRx's right to purchase an additional ownership interest in VDM-001, among other things.

VDM filed a cross-complaint (the cross-complaint) against BioCorRx. Generally, it alleged BioCorRx had induced VDM to disclose confidential information under the NDA and to enter the letter of intent. VDM claimed BioCorRx never intended to abide by the NDA or to enter into a formal agreement concerning VDM-001. Rather, it entered these agreements to attract investors and boost its stock price. BioCorRx allegedly perpetrated this scheme by issuing the press releases, which contained confidential information and misrepresentations about BioCorRx's relationship with VDM and VDM-001's development. VDM also asserted BioCorRx improperly failed to redact confidential information in the complaint (the unredacted statements). Based on these allegations, the cross-complaint set forth causes of action for breach of the NDA, breach of the letter of intent, breach of the implied covenant of good faith and fair dealing, fraud, misappropriation of trade secrets, unjust enrichment, and violations of Business and Professions Code section 17200.³

In response, BioCorRx filed an anti-SLAPP motion seeking to strike all the allegations from the cross-complaint concerning the press releases. It claimed these statements were matters of public interest under section 425.16, subdivisions (e)(3) or (4). BioCorRx also sought to strike the cross-complaint's allegations concerning the unredacted statements.

VDM filed a motion to take discovery to oppose the anti-SLAPP motion. Generally, it sought to depose a BioCorRx representative on various topics concerning the press releases, and it also sought documents related to those topics. The trial court found VDM had failed to establish good cause to conduct discovery and denied the motion.

After its discovery motion was denied, VDM filed an opposition to the anti-SLAPP motion. Primarily, it argued the press release statements were exempt from the anti-SLAPP statute under the commercial speech exemption. It also asserted these statements were not protected activity under section 425.16, because they did not concern a matter of public interest. It only offered token opposition to a portion of the anti-SLAPP motion directed to the unredacted statements.

The trial court granted BioCorRx's anti-SLAPP motion. As to the press release statements, it found VDM had failed to establish all the elements of the commercial speech exemption. It also held these statements were protected speech under section 425.16, based on authority finding medical care and treatment to be topics of public interest. As for the unredacted statements, the court ruled they were protected activity and privileged.

On appeal, VDM makes three arguments. First, the anti-SLAPP statute does not apply to the press release statements because they fall within the commercial speech exemption. Second, the press release statements are not protected activity under the anti-SLAPP statute and, even if they are, VDM has shown a probability of prevailing on its claims. Third, the trial court erred by denying VDM's motion to take discovery. Since we agree with VDM's first argument, we do not address the remaining contentions.⁴

IIDISCUSSION

A. The Anti-SLAPP Statute

Section 425.16 was enacted " ‘to prevent and deter "lawsuits ... brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances." [Citation.] Because these meritless lawsuits seek to deplete "the defendant's energy" and drain "his or her resources" [citation], the Legislature sought " ‘to prevent SLAPPs by ending them early and without great cost...